AmProp’s 1QFY17 earnings within expectations

Amcorp Properties Bhd (Aug 22, 92 sen)

Maintain hold with unchanged target price of 89 sen: In the absence of any major property disposal, Amcorp Properties Bhd’s (AmProp) net earnings contracted a sharp 92% year-on-year to a mere RM4.5 million.

Recall that AmProp’s first-quarter financial year 2016 (1QFY16) earnings was propped up by the sale of 4B Merchant Square, in London, which netted a gain on disposal of RM57 million.

1QFY17 revenue of RM44 million was supported by its domestic operations comprising property sales in its Sibu township, rental income, engineering and contracting work, and renewable energy.

1QFY17 earnings accounted for 6% of our full-year forecast, in line as we expect a major property completion in the 4QFY17.

AmProp’s quarterly earnings profile should remain unexciting over the next two quarters with the absence of any earnings recognition from its London projects.

Accordingly, we lower our FY17 to FY19 earnings per share (EPS) forecasts by 6% to 28%. Our FY17 net profit of RM77 million will predominantly be underpinned by the Campden Hill project which is slated for partial completion by February 2017, with the remainder in the following financial year.

We remain upbeat over the longer-term growth prospects of the group as both Campden Hill and Burlington Gate (completion in 1Q18) have seen a strong take-up and provide strong future earnings certainty.

Brexit remains a key risk for the stock as at least 90% of group earnings is derived from the London property segment. Nevertheless, post the event, management has guided that it has not seen any adverse demand pullback for its properties.

A downside risk would be further depreciation in the British pound, which would negatively impact our EPS forecasts, while upside risks are stronger-than-expected demand and an improvement in property prices. — Affin Hwang Capital Research, Aug 22

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This article first appeared in The Edge Financial Daily, on Aug 23, 2016. Subscribe to The Edge Financial Daily here.